Profits have fallen despite the company's massive revenue growth.
The stock's valuation is near multi-year lows, possibly signaling a buying opportunity.
Investors may have soured on MercadoLibre (NASDAQ: MELI) stock. Although the company continues to report considerable revenue growth, increased competition and the rising number of non-performing loans led to a drop in the stock price over the last year.
Currently, I am a shareholder. Still, even if I did not yet own shares, I would buy this top e-commerce company, and the price of around $1,700 per share would not be an obstacle.
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The reason I would buy is that MercadoLibre is not suffering from declining profits so much as deferred profits.
In the first half of 2026, revenue increased by 50% yearly to $10.2 billion. However, with the company less focused on profit right now, net income dropped 11% to $466 million over the same period.
In its e-commerce business, it cut margins to address rising competition in retail. While that means lower profits now, increased market share should ultimately boost profits.
On the fintech side of the business, it has dramatically increased the size of its loan portfolio, and that move increased the number of non-performing loans. Although the company worked to address that issue, it has had to nearly double its provision for doubtful accounts.
The other issue is its nominal share price, and admittedly, buying just one share may feel pointless. Still, that investment of about $1,700 can give investors full voting privileges and fewer restrictions, while positioning them to benefit from future gains. Moreover, investors can buy MercadoLibre stock at a P/E ratio of 46, a valuation near multi-year lows.
Still, the number that probably matters more than the nominal price is its market cap. At $85 billion, it is a tiny fraction of Amazon's $2.7 trillion market cap, implying significant room for growth.
Amid these efforts, investors should focus on the fact that MercadoLibre is building the infrastructure Latin America's economy will run on for decades. That suggests future investors may regret not buying MercadoLibre stock while it was still in the $1,700-per-share range.
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Will Healy has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon and MercadoLibre. The Motley Fool has a disclosure policy.